Hiring and Wages on the Rebound

Michael Alter is president of SurePayroll, America?s leading online payroll service. He received an MBA from the Harvard Business School and holds a bachelor's degree in economics from Northwestern University.

What a difference a month makes! If most people equate these economic times with an emotional roller coaster, small business owners have been on the ride of their lives.

Last month I reported a near-record-low level of small business optimism, 46 percent. In other words, fewer than half the business owners out there felt confident about the direction of the economy. That pessimism came despite an increase in small business hiring and other signs of stabilization, as indicated by the SurePayroll Small Business Scorecard, an economic indicator we created in order to track the health of the U.S. small business economy.

Luckily, the numbers continued to improve in February. Hiring has increased by 1.9 percent year-to-date. And paychecks were essentially flat (up 0.2 percent) for the first time in February following two years during which paychecks declined month after month. The biggest difference of all involved employer confidence. More business owners report that they feel good about the economy. In fact, optimism shot up 16 percentage points over January's numbers. Now well over half of small business owners say they are optimistic about the small business economy.

So the big question is: Will that sentiment endure and propel the economy forward?

Truth is, while the numbers are telling us we've bounced off the bottom and are now heading in the right direction, only the actions of the small business owners will demonstrate when we're completely out of the water. When they're feeling positive, we'll see their safe-bet decisions, such as hiring contract workers rather than adding full-time employees, turn into more aggressive actions, such as adding headcount and making capital expenditures. When that starts to happen, more money will move through the economy, building positive momentum. We'll see paychecks holding steady, without erratic dips or slight increases. We'll also see our optimism levels return to 2007's highs of nearly 80 percent. For business owners and for everyone else, we can't get off this wild ride a minute too soon.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.